Managing Exposure to Creditors
It’s important to protect your business interests from creditors as far as possible. There are various ways you can stay in control. Whether you’re selling or buying, you should try to ensure that you have properly written terms and conditions in place, that you start a business relationship on a solid footing, that you clear up any potential ambiguities, and that you build up a degree of trust. You should also ensure that your creditors fully understand your intentions.
Legal action can be extremely expensive so it’s best avoided if at all possible. Larger creditors may be less willing to compromise if you are indebted to them. You should keep your records in order. Always reply very promptly to any legal correspondence to reduce the chance of a winding up application being made against your business.
If you are in debt, there is debtor protection legislation which might assist you.
See below for further details of these points.